In brief
A property in Romania can be financed in two ways: an Israeli all-purpose mortgage, secured by a property in Israel, or a mortgage from a Romanian bank secured on the property itself. The choice depends on existing capital, properties in Israel and the structure of the transaction, and neither is always preferable.
Key takeaways
- 1An Israeli all-purpose mortgage is secured by a property in Israel and is not tied to the Romanian property.
- 2A mortgage from a Romanian bank allows a purchase with less equity, and the LTV is usually about 60% to 70%.
- 3A Romanian bank requires a lien on the property, proof of income from Israel, 3 to 6 months of bank statements, an agreement with a management company and a NIF.
- 4Approval of a mortgage from a Romanian bank takes about 30 days, but preparing the documents on the Israeli side (translation, notary, apostille) can take 2 to 4 weeks.
- 5Proper financing is a question of structure: what is financed, with what, and at what cost.
Can you take a mortgage on a property in Romania?
Yes, and there are two entirely different ways to do it: an Israeli all-purpose mortgage, or a mortgage from a Romanian bank on the property itself. Each has its own logic, and neither is always preferable. This question is being heard more and more in recent times.
A mortgage from a Romanian bank allows a purchase with less equity, and the LTV is usually about 60% to 70%.
How does an Israeli all-purpose mortgage work for a purchase in Romania?
If you own a property in Israel, you can take an all-purpose mortgage on it and use the money to finance a purchase in Romania. This is the simplest track bureaucratically: you work with an Israeli bank, in your own language, with documents you are familiar with.
The advantage: the interest rate is set with the Israeli bank, without an approval process with a foreign banking system. The disadvantage: the mortgage appears in your credit report and limits your ability to obtain additional financing in Israel. It is important to understand that this mortgage is not tied to the Romanian property - it is secured by a property in Israel, so you are in effect making use of existing equity.
What does a Romanian bank require of an Israeli investor?
A mortgage from a Romanian bank is of growing interest to investors, because it allows a purchase with less equity, with the property itself pledged to the bank. The bank requires:
- A lien on the property as collateral
- Proof of income from Israel - pay slips or accountant's reports
- Bank statements for the last 3 to 6 months
- An agreement with a property management company, since part of the loan repayment comes from rental income
- Obtaining a NIF, the Romanian tax identification number, without which no financial transaction can be completed in Romania
The loan-to-value ratio (LTV) is usually about 60% to 70%, so the required equity is about 30% to 40%. The range varies from bank to bank.
How long does it take to obtain a mortgage from a Romanian bank?
Approval of a mortgage from a Romanian bank usually takes about 30 days, provided all the required documents have been submitted. The part that usually causes delay is not the bank but the preparation of the documents on the Israeli side: certified translation, notary and apostille - a process that can take about 2 to 4 weeks. Anyone planning to finance through a Romanian bank should start preparing the documents early, and not a week before signing.
Does it work numerically? An illustrative example
The example is for illustration only, and the numbers vary by property and interest rate. A property worth EUR 200,000, with EUR 70,000 equity (35%) and a Romanian mortgage of EUR 130,000:
| Parameter | Value in the example |
|---|---|
| Property value | EUR 200,000 |
| Equity | EUR 70,000 (35%) |
| Romanian mortgage | EUR 130,000 |
| Gross rental yield | About 7.2%, about EUR 1,200 per month |
| Net income after management and ongoing expenses | About EUR 1,050 to 1,100 per month |
| Monthly mortgage repayment | About EUR 800 to 900 |
In such a case the tenants in practice cover most of the repayment, and the property owner builds equity over time. This is not a guarantee, but a model that works when the property is right, the location is right and the management is professional. Tax on the rental income is not included in the example, and it affects the yield.
What is worth doing before signing?
Proper financing is not only a question of how much money you have, but a question of structure: what is financed, with what, and at what cost. Anyone who plans this structure before signing arrives at closing with numbers that work.
What is stated in this article is general information only and does not constitute legal advice, tax advice or an investment recommendation. Financing terms, laws and tax rates may change, and specific circumstances may affect their application to a given case. Before any decision, it is advisable to seek individual advice.
Frequently asked questions
What is the difference between an Israeli all-purpose mortgage and a mortgage from a Romanian bank?
An Israeli mortgage is secured by a property in Israel and is not tied to the Romanian property, and it appears in the credit report. A Romanian mortgage is secured on the property itself and allows a purchase with less equity.
How much equity is required for a purchase in Romania with a mortgage from a Romanian bank?
The LTV is usually about 60% to 70%, so the required equity is about 30% to 40%. The range varies from bank to bank.
Which documents does a Romanian bank require of an Israeli investor?
A lien on the property, proof of income from Israel (pay slips or accountant's reports), bank statements for 3 to 6 months, an agreement with a property management company and a NIF.
How long does approval of a mortgage from a Romanian bank take?
Usually about 30 days, if all the documents have been submitted. Preparing the documents on the Israeli side, certified translation, notary and apostille, can take about 2 to 4 weeks, so it is worth starting early.
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